Oct 05 2009
Pay Freezes
The Guardian newspaper has a story today about a survey that shows one in three firms operating a pay freeze. The businesses justify this as an attempt to preserve jobs even when the firm itself is in a profitable part of the economy. Some unfortunate people are on their second year of frozen pay.
What should you do if you have had to accept a pay freeze? The only thing to be done is to try to cut outgoings, especially debt. The interest on the debt becomes ever more burdensome in deflationary situations were wages don’t rise. It means that natural income progression can’t minimise the problem with time. The only way to give yourself a payrise in these circumstances is to cut your debts. Initially it will seem tough, but as the debt falls away, you should be able to negotiate lower interest rates on the remainder, and hence cut your outgoings.
The trouble is that while people were enthusiastically paying down debt in the first half of the year, they now seem to be tired of making the effort and are back to hoping that “something will turn up”. However I believe that the deflationary wage freeze world is here for some time (perhaps two more years). So the only way to get a bit of relief into the situation is tackle the debt now. I know I sound a bit like a broken record harping on the same topic endlessly, but there it is.
